Julius Genachowski Leaves the F.C.C.

After four and a half years running the F.C.C., Julius Genachowski is stepping down on Friday. He’s had an eventful time: dealing with net neutrality, spectrum auctions, mergers, and David Ortiz’s exhortative expletive on national TV. As Genachowski prepares to leave, he agreed to chat with The New Yorker about his legacy and what he hopes to see the F.C.C. do next.

Nicholas Thompson: Are you as much of an optimist as you were four and a half years ago?

Julius Genachowski: I am. I am. I think the phrase that’s appealing to me is “tough-minded optimism.” I’m an optimist about the power of technology to transform lives for the better. And I’m still an optimist about the ability of the U.S. to lead the world in developing the innovations that will bring those dreams to reality.

**N. T.: You were asked to describe your tenure, and you answered with three words: “unleashing broadband’s benefits.” I want to ask about the word “benefits.” Why does broadband seem not to be having as wide an effect on productivity as many people believed a little while ago?

J. G.: Well, I’m not sure that I agree with the premise. McKinsey did a study last year that looked at the effect of broadband on productivity and job creation, and it reached positive conclusions. It certainly is leading to new products for people that people value. It’s certainly leading to massive amounts of capital investment. It’s leading to job creation. It’s leading to new technologies that are improving education and health care. You know, sometimes these things happen, and you don’t notice as much when you’re in the middle of it because they seem incremental to you. But, you know, four years ago people didn’t have smart phones; two and a half years ago, people didn’t have tablets; the apps economy didn’t exist four years ago.

One of the things I’ve come to realize is that, like every new technology and like every disruption, broadband has downsides. So it is the case that in some sectors and some businesses, broadband, and the productivity that it unleashes, leads to fewer jobs. It’s also true that in some cases, like distracted driving, new technologies create new dangers. I’m an optimist that the net effect of broadband and new communications technologies is very, very positive. One of the things we have to do as a society, faced with new technologies, is maximize the benefits and minimize the downsides. And I see those two things together as an important part of the role of the F.C.C.

How satisfied are you with the increase in broadband access under your tenure? Do you feel like you’ve lived up to the ambitions of your 2009 National Broadband Plan?

On broadband adoption, we’ve gone, over the last four years, from about sixty per cent adoption in the U.S. to about seventy per cent. That’s good but it’s not enough. We have to get to one hundred per cent, and that’s going to take a lot of work.

And how much of it is going to be infrastructure, and how much of it is going to be reducing prices? Broadband infrastructure is available to about ninety-five per cent of the population. So it’s this area of adoption and affordability where the commission will have to do more work. There have been some important steps that have been taken. Through Connect to Compete, ten-dollar-a-month broadband is being made available to families with school-lunch programs. One way or another, we need to understand that broadband is essentially telephone service, and just as we got to telephone service in the United States to one hundred per cent, we need to do it for broadband.

Do the economic, social, and educational benefits of broadband come more quickly for people who are getting it for the first time? Or is at the higher income levels and later levels of experience in broadband where you get the most benefits?

We’ve done studies on why people who don’t have broadband don’t adopt. Some people simply just can’t afford it. And there are other issues too: some people undervalue the benefits of broadband. So they could afford it but they elect not to get it. The data shows that when that segment gets it, they see the values and then they stay online. Another category is the lack of digital literacy. Way too many people just don’t have basic digital skills, and you could give them a computer and it wouldn’t really help them.

Do you feel like you’ve made enough efforts during the past four years to solve the digital literacy problem?

It’s something we have worked on, both ourselves and with the Education Department. The thing that I’m pleased about is that we see a focus on this issue that wasn’t there before. It’s a focus of the F.C.C., a focus of the Department of Education, and a focus in the private sector. For example, with our encouragement, the Ad Council is now including, in their public-service ads, broadband-adoption-related P.S.A.s. Five years ago, you couldn’t have gotten a meeting on the topic.

Let me mention one other thing that we’ve done in this area that will pay dividends over time: we launched pilot programs under our Lifeline program to test out ways to increase broadband adoption. We did that, for example, with connecting health-care facilities, where we started with a relatively small thirty-million-dollar program to connect health-care facilities, hospitals, and clinics. We learned from that, and last year we expanded that to roughly three hundred million dollars a year.

But the pilots and the programs are a relatively small part of getting the number up right? The main thing that a F.C.C. commissioner can do is to make the markets more efficient?

Well, I’m not sure of that. I completely believe in getting the market incentives right for all of this, and encouraging investment and innovation. But on this particular issue of broadband adoption, what we need to do is focus on the issues that I mentioned that are the barriers: affordability, digital literacy, underestimating the value, trust. Some people don’t adopt it because they don’t trust being online.

They believe that their privacy will be invaded and their children will see porn?

That’s part of it. You know, small businesses were slower than large businesses in adopting broadband. One of the reasons was they were concerned with putting their customer lists online or in the cloud. Not that there aren’t risks. There are. But those are issues that get adjusted.

Over the past decade, despite low inflation, the price of cable television keeps climbing and climbing, to the point that poverty forms a major barrier to future growth. Should, or can, something be done about the price of programming?

Programming costs are going up. They’re leading to increases on consumer bills, and that’s an issue.

But virtually every consumer has three alternative cable providers and two satellite providers. Many have access to a telephone provider like FiOS or A.T. & T. U-verse. It’s one of the reasons that we pushed so hard on net neutrality and keeping the pipes open for online video. That’s part of the competition story that will put downward pressure on prices. That will be an ongoing issue for the F.C.C. and for Congress.

There’s no specific action that you think the F.C.C. should be looking at or that you would advocate to bring prices down besides increasing competition?

Well, increasing competition is very important. There’s a statutory scheme here called the retransmission consent regime that sets out the parameters for the F.C.C. to act. I’ve encouraged Congress to take a fresh look at that, and we’ve been acting as a resource to Congress. But there’s no question that promoting competition and innovation is where the F.C.C. remains vital.

If I’m hearing correctly, there are a whole bunch of things that could bring the prices down. You’re not saying whether you’re in favor or against them, but they’re not things you even could do within the mandate of the F.C.C.?

Yes. We said publicly that the current statutory scheme limits the ability of the F.C.C. on retransmission consent. I’m on the record now for some time saying that the world in some important respects has changed since that statutory framework was adopted, and Congress should take a fresh look at it.

Do you think the F.C.C. should be more isolated from Congress, perhaps as an executive agency?

I wouldn’t fix what’s not broken. An independent F.C.C. has been able to move forward on big initiatives, whether it’s universal-service reform, net neutrality, broadband data roaming. I think it’s a good system that’s working.

Most countries in the world have multiple agencies that do what the F.C.C. does. You will see one agency that does telephones and wired communications. That is often also the post office. And you’ll see one that does spectrum and one that does international and satellite. In the U.S., we have one agency doing all of the above since 1926 with the Federal Radio Commission, and 1934 for the F.C.C. It’s a little bit of an accident of history, and we have Herbert Hoover to thank for this. But it’s worked. For many, many years, it wasn’t clear what the efficiency was. But now that we have moved to a digital Internet universe, it’s clear that there’s an advantage to having a single expert agency that is responsible for all the different ways that digital information moves around.

But you could still have a converged agency that was part of the executive branch or was an executive agency?

Sure, but I’m saying if it ain’t broke, don’t fix it.

You don’t think it’s broke?

I don’t think it’s broke.

Let’s talk about spectrum. In 2009, your broadband plan made a big bet on spectrum, saying you hoped to make five hundred megahertz in new spectrum available in ten years. Roughly five years later, we’re obviously not quite halfway there. Was the five hundred megahertz number too optimistic, too high?

No, if I remember correctly, we had two targets: there was three hundred megahertz in five years, and five hundred in ten years. We are going to hit the three-hundred-megahertz target and that’s taken a lot of work. It’s going to take more work to get the five hundred megahertz. It’s going to take more work to get the next two hundred megahertz. It’s going to require another level of coöperation between the commercial sector and the military and government. It’s going to require more and more removing of barriers and it’s going to require more creative ideas.

Are there particular creative ideas you want to advocate for?

Well, the incentive auction that the U.S. will conduct can potentially be replicated in other parts of the spectrum, and that’s a big deal. Another piece of the puzzle is unlicensed spectrum. That’s an area where there’s clearly been some disagreement. But I feel very strongly that freeing up more unlicensed spectrum as part of our landscape is a big part of the solution. And then another big idea that I think needs to continue to be pursued intently is spectrum sharing, including spectrum sharing between commercial and military users. You can imagine spectrum that the military is using in few places in the country and only at certain times. Those uses are important. But it makes no sense to say that that spectrum in all the other geographic areas and all the other times shouldn’t be available to commercial companies and consumers.

When the commission did unlicensed spectrum for the first time, thirty years ago, no one knew what it would lead to. It was a platform for innovation and it led to these cool things: cordless phones, baby monitors, Bluetooth, Wi-Fi. And so another potential big idea is a new generation of unlicensed spectrum with much better propagation characteristics. I believe will lead to a whole new generation of innovation that may involve, for example, machine-to-machine Internet. But that’s a big idea that we put forward that the F.C.C. needs to continue to move forward on.

So why hasn’t that happened?

It is happening. When we recovered spectrum from broadcasters, we said the biggest chunk of that should go for auction for licensed use. But we should also reserve a very significant amount for unlicensed use.

Let’s talk about mergers. You let the NBC-Comcast one go through and blocked T-Mobile–A.T. & T. Were those the right choices?

I believe they were the right choices. I want to add one other major transaction to that, which is the Verizon-SpectrumCo transaction, where we insisted on the very large divestiture of spectrum to T-Mobile before approving. I think that if you look at those together, you can see a pro-competition, pro-investment philosophy of merger review.

How is the NBC-Comcast one pro-competition?

Well, we placed very stringent conditions on that transaction on net neutrality and over-the-top video. A.T. & T.–T-Mobile was not a transaction where the harms could remedied by conditions on the deal, in my opinion. Four years ago, the conventional wisdom, which was correct, was that the mobile market in the U.S. was heading toward duopoly. And two and a half years ago, when it was announced, the mobile industry in the U.S. was on the doorstep of duopoly.

I believe if the F.C.C. had approved that merger, we would have ended up with duopoly in mobile in the U.S., which would have been bad news for our innovation economy. It would have depressed investment in innovation on the mobile platform.

Instead, what we’re seeing now is growing competition in the sector. T-Mobile is getting stronger, as is Sprint. Competition will remain an issue. But the trend lines are now moving in the right direction.

T-Mobile recently announced it would end its mandatory termination fees, charge consumers who bring their own phones less, and other pro-consumer decisions. If even the industry thinks these practices are an abuse of consumers, why doesn’t the F.C.C. stop them?

It’s an important question. I have come to believe that government action is more likely to be successful and effective when it is structural. Behavioral regulation is much harder to implement successfully. Obviously there are times when the market structure is such that behavioral regulation is necessary. And when it is, we have to do it. Net neutrality is an example of that. Broadband data roaming is an example of that. And we have taken the tough actions when they were necessary and desirable.

So you believe that the market with four competitors can be a functional market, even though some people would claim that they act like oligopolies?

A market with four competitors is dramatically better for innovators and consumers than a market with two. Are there competition issues in a four-player market? Yes. And that’s why, for example, we adopted broadband-data-roaming rules. It was why, for example, I pulled the whistle early on cell-phone unlocking. It’s why we’ve had major enforcement actions on mystery fees and cramming. We have seen, in the last four years, the largest enforcement in the history of the F.C.C.

I don’t think that the rules will be struck down. The history is important here: about seven years ago, the commission adopted voice-roaming rules. What are those? It means that, if you are a non-incumbent mobile company, you can ensure that your customers can roam onto the networks of the incumbent companies. That’s something that to have a competitive market you need. If you’re a smaller company, even if you are a T-Mobile or Sprint with smaller networks, you need to be able to make sure that your customers can get service wherever they are. And so the commission had voice-roaming rules in effect. But at the time the commission made that decision, it did not apply those rules to broadband data.

Now in today’s world, the way we use our mobile devices, we use them as much for broadband data as we do for voice. And so we had to confront the question, whether we would extend the voice-roaming rules to broadband. And it was a controversial topic. Ultimately, on a 3–2 vote, we adopted broadband-data-roaming rules. My colleagues on the commission, the G.O.P. who dissented, predicted that we would lose in court. That we would lose in court because our authority doesn’t extend to broadband. In fact, we won. So that’s point one.

Point two is that, I think, Supreme Court precedent in this area is very clear. Meanwhile, business and social norms around net neutrality are hardening in our society. It’s been two or three years since we adopted the net-neutrality rule, which proves that the doomsdayers were wrong. What the doomsdayers said was that, if the commission adopted the net-neutrality rule, it would halt investment in broadband networks, and that hasn’t happened. Instead, we’ve seen significant increases in investment throughout—in applications and services as well as networks.

So one of the things that we’ve seen is that the net-neutrality rules on the books are pro-investment and pro-innovation. And those rules should stay on the books to make sure that the U.S. continues to lead the world in broadband.

There’s a critique made by technology companies that the government just can’t move fast enough to regulate them. Technology law can’t be set by Congress or even really by the courts. It needs to be set by the private sector. You’ve been on the outside and now on the inside. What do you think?

Well, I think we need an expert agency—we need an expert F.C.C. that has the expertise and the ability to move quickly in these areas because technology does move quickly, and the globalization of these markets is important, too. Today, capital and talent can flow anywhere in the world. And innovation can happen anywhere in the world. It’s essential that we have an infrastructure and a set of policies that attract capital and talent here in the United States.

A smart, effective, efficient F.C.C. is critical to that. Whether it’s resolving the net neutrality in a strong and smart way, whether it’s freeing up spectrum quickly for our mobile ecosystem, whether it’s moving forward on unlicensed spectrum as a new platform for innovation. So I think the need for an extra agency like the F.C.C. has never been stronger. And that’s because of rapidly changing technology and the globalizing of these markets.

Do we have the right balance right now? Is there some other framework we need for thinking about the choices that Google and Facebook make that determine so much of our life?

As I said, new technologies and changing markets create enormous new opportunities but they also present new challenges. And this is a challenge that we share as a society and an economy, which is, what is the best framework to maximize the opportunities and to deal with the issues? And the issues can range from public-safety issues to competition issues in actions that can suppress innovation in private investment. We do need to make sure that we have expert agencies of government that understand the technology and that are focused on promoting innovation, promoting private investment, promoting competition, and empowering consumers

Tell me about your decision not to censure David Ortiz?

I was born in Boston. My dad and I both went to school in Boston, and I wanted to show solidarity to the people of Boston. Also, turning this agency from an indecency agency to an investment-and-innovation agency has been one of my highest priorities.

Now you’re off to the Aspen Institute?

Yes.

Any last thoughts to leave our readers?

Well, where we are now versus four years ago. Then we were talking about South Korea and Japan, and we were talking about mobile infrastructure and how Europe had gotten ahead of the U.S. on 3G. Today, it’s a different world: the U.S. has moved from laggard to leader. The world is using American-made applications, whether it’s Facebook, Twitter, Google, etc. Four years ago, the percentage of mobile devices globally that had American-made O.S.s, was under twenty per cent and today it’s up to ninety per cent. And that’s largely the stunning success of Apple’s iOS and Google’s Android. From an American global-competitiveness story, that’s a big deal.

And from an infrastructure side, the U.S. has more 4G subscribers than the rest of the world combined. Any innovator in the world who wants to innovate on a 4G scale has to come to the U.S. right now and that’s a big deal.

Lastly, look at investment in infrastructure. There’s no country in the world growing faster in wireless. That’s paying off already but will pay off even more one, two, three, four, five years from now with the investments that are going into our wireless infrastructure. On the wireline side, I’ll leave you with a few points. One: in the U.S., networks capable of one hundred megabytes or more today reach eighty per cent of homes. Four years ago, that was twenty per cent. The percentage of European homes that get thirty megabytes or more is fifty per cent.

Now we have a lot of work to do in the future. Every country in the world is waking up, saying, “How do we lead the world in innovation?” And they’re very focused on how do they leapfrog on all of these issues. Like I said, I think we have major challenges on spectrum, major challenges on keeping the investment going into the ground and into our spectrum. But our trajectory now is much better than it was several years ago.